A real estate investment trust ( REIT ) is a company that owns, and in many cases operates, real estate that generates revenue. REIT has many types of commercial real estate, ranging from office buildings and apartments to warehouses, hospitals, shopping centers, hotels, and forests. Some REIT are involved in financing real estate. The law regulating REIT was enacted by the US Congress in 1960. The law was intended to provide a real estate investment structure similar to that of mutual fund structures that provide investments in stocks. REIT is a powerful revenue vehicle because, in order to avoid the obligation to generate Federal income taxes, REIT generally must pay an amount equivalent to at least 90 percent of their taxable income in the form of dividends to shareholders.
REITs may be publicly traded on the main, public but unregistered, or private exchange. The two main types of REITs are REIT equity and REIT mortgages (mREITs). In November 2014, REIT equity was recognized as a distinct asset class in the Global Industry Classification Standard by the Dow Jones S & amp; P and MSCI. Key statistics for checking the REIT financial and operating position are net asset value (NAV), operating funds (FFO), and adjusted funds from operations (AFFO).
Video Real estate investment trust
History
Creation
REITs were created in the United States after President Dwight D. Eisenhower signed the Public Law 86-779, sometimes called the 1960 Cigarette Excise Tax Revenue. The law was enacted to allow all investors to invest in large-scale and diversified portfolios. producers of real estate income in the same way they usually invest in other asset classes - through the purchase and sale of liquid securities. The first REIT is the American Realty Trust founded by Thomas J. Broyhill, a cousin of U.S. US Congressman. Joel Broyhill in 1961 that encouraged the creation under Eisenhower.
Since then, more than 30 countries around the world have established the REIT regime, with more countries working. The deployment of REIT approaches to real estate investments around the world has also raised awareness and receipt of investments in global real estate securities.
The comprehensive index for REIT and the globally listed property market is the FTSE EPRA/Nareit Global Real Estate Index Series, co-created in October 2001 by the providers of the FTSE Group, Nareit and European Public Relations Real Estate (EPRA) indexes.
By December 2017, the global index including 477 listed real estate firms on the stock market of 35 countries representing equity market capitalization of about $ 2 trillion (with about 78% of that total from REIT).
Evolution
Around the time of their creation in 1960, REIT first consisted primarily of mortgage companies. The industry experienced significant expansion in the late 1960s and early 1970s. Growth is primarily resulted from increased use of mREIT in land development and construction agreements. Tax Reform Act of 1976 REIT authorized to be established as a company in addition to business confidence.
The Tax Reform Act of 1986 also affected REIT. This law includes new rules designed to prevent taxpayers from using partnerships to protect their income from other sources. Three years later, REITs witnessed significant losses in the stock market.
REITENA REIT Pusat Taubman Inc. launched the modern era of REITs in 1992 with the creation of UPREIT. In UPREIT, the parties of the existing partnership and REIT become partners in the new "operating partnership". REIT is usually a general partner and majority owner of the operations partnership unit, and the donating partner of the property has the right to swap their operations partnership units for REIT shares or cash. The industry began to struggle in 2007 when the global financial crisis kicked in response to the global credit crisis, registered REITs responded by deleveraging (repaying debt) and re-equitizing their balance sheets. Registered REITs and REOCs raised $ 37.5 billion in 91 secondary equity offerings, nine IPOs and 37 unsecured debt offerings as investors continue to act well against companies that strengthen their balance sheets after the credit crunch.
For the five-year period ending December 31, 2017, all REITs listed on the stock accounted for a total return of 60.29%, with a total annual yield of 9.90%. REIT share equity listed on the exchange has a total return of 59.85% over the same period, with a combined total annual return of 9.83%. S & amp; P 500 has a total return of 108.14% over the same period, with a total annual return of 15.79%. The economic climate is characterized by rising interest rates having a detrimental effect on REIT shares. Dividends paid by REITs look less attractive when compared to bonds that have increased coupon rates. Also, when investors shy away from REITs, it makes management difficult to raise additional funds to acquire more property.
Maps Real estate investment trust
Africa
Kenya
The first REIT in Kenya was approved by the Capital Market Authority in October 2015. REIT was published by Stanlib Kenya under the Fahari I-Reit scheme. The REIT scheme will provide holders of a stable cash flow unit of income generating real estate properties. Unrestricted IPOs will be listed on the main investment market segment of the Nairobi Securities Exchange.
Ghana
REITs have been in Ghana since 1994. The Home Finance Company, now HFC Bank, established the first REIT in Ghana in August 1994. HFC Bank has been at the forefront of mortgage financing in Ghana since 1993. It has used various collective investment schemes as well as bonds the company to finance the activities of mortgage lending. The Collective Investment Scheme, where the REITs are part, is governed by the Securities and Exchange Commission of Ghana.
Nigeria
In 2007, the Securities and Exchange Commission (SEC) issued the first set of guidelines for registration and issuance of requirements for the operation of REITs in Nigeria as detailed in the Investment and Securities Act (ISA). The first REIT, N50 billion Union Homes Hybrid Real Estate Investment, was launched in September 2008. In November 2015 there were three REITS listed on the Nigerian Stock Exchange: Skye Shelter Fund, Union Home and UPDC. A Haldane McCall REIT is not listed after failing to reach a minimum 50% subscription in a public offer early in January 2015 amid poor market prospects.
South Africa
In October 2015 there were 33 REIT South Africa and three non-South African REITs listed on the Johannesburg Stock Exchange, according to the SA REIT Association, which said the market capitalization was over R455 billion.
Asia
Australia
The REIT concept was launched in Australia in 1971. The General Property Trust is Australia's first real estate investment trust (LPT) in the Australian stock exchange (now the Australian Stock Exchange). Registered REITs are known as the Registered Property Badge (LPT) through March 2008, which sets them apart from the known private REIT in Australia as Unregistered Property Trust. Since then they have been renamed Australian Real Estate Investment Trusts (A-REITs) in accordance with international practice.
REITs have shown many benefits over direct investment including lower tax rates and increased liquidity. There are now more than 70 registered A-REITs in the ASX, with a market capitalization of over A $ 100 billion.
Australia has also received increasing recognition for having the largest REIT market in the world outside of the United States. More than 12 percent of registered global property trusts can be found on ASX.
Hong Kong
REIT has been in Hong Kong since 2005, when The Link REIT was launched by the Hong Kong Housing Authority on behalf of the Government. Since 2005, there have been 7 REIT lists in July 2007, most of which, including Sunlight REIT have not enjoyed success because of low results. Except for The Link and Regal Real Estate Investment Trust, all share prices except one are significantly below the initial public offering price (IPO). The use of financial engineering by Hong Kong (interest rate swap) to improve initial results has also been referred to as reducing investor interest
As of July 2012, there are nine REITs registered with a total market capitalization of around EUR15 billion that is almost 2% of total REIT global market capitalization. Two of the nine REITs listed are also included in the EPRA index, an index published by the European Public Real Estate Association (EPRA). The top five REITs currently in Hong Kong are The REIT Link with a total market capitalization of EUR8 billion, Hui Xian REIT with total market capitalization of EUR2.3 billion, REIT LEADER with total market capitalization of EUR1.8 billion, Fortune REIT with market capitalization total of EUR1 billion and Real Estate Regal with total market capitalization of EUR700 million.
India
In August 2014, India approved the creation of real estate investment trusts in the country. REIT India (special state/generic version of I-REITs) will help individual investors enjoy the benefits of having an interest in the securitized real estate market. The biggest benefit is the quick and easy liquidation of investments in the real estate market unlike the traditional way to get rid of real estate. The Government and the Securities and Exchange Board of India through various notices are in the process of making it easy to invest in real estate in India directly and indirectly through foreign direct investment, through registered real estate companies and mutual funds. In the 2014 budget, finance minister Arun Jaitley has introduced legislation to prepare REIT.
China
China is one of the countries that are motivated and interested in approving the creation of real estate investment trust.
Japanese
Japan is one of a handful of countries in Asia with the laws of REIT (other countries/markets including Hong Kong, Singapore, Malaysia, Taiwan and Korea) allowing its establishment in December 2001. J-REIT securities are traded on the Tokyo Stock Exchange, and most J-REITs service providers are Japanese real estate companies, Japanese conglomerates, and foreign investment banks.
Since the explosion of real estate bubbles in 1990, property prices in Japan have seen a steady decline until 2004, with some signs of price stabilization and possible price increases in 2005 and 2006. Some people see J-REITs as a way to increase investment in the real estate market estate, although important increases in asset value have not been realized.
J-REIT (trust registered real estate investment) is strictly regulated under the Investment Trust and Investment Trustees Act (LITIC) and is designated as an investment company under LITIC.
In addition to REIT, Japanese law also provides parallel systems for specialized destination companies that can be used to securitize certain properties on a personal placement basis.
Malaysia
Bursa Malaysia (www.bursamalaysia.com) has 18 registered REITs with five Islamic REITS (according to sharia - according to Islamic investment compliance).
Pakistan
The Securities and Exchange Commission of Pakistan is in the process of implementing REIT's regulatory framework which will enable the full foreign ownership, free capital movement and unlimited repatriation of profits. This will curb speculation in Pakistan's real estate market and provide access to small investors who want to diversify into real estate. The Securities and Exchange Commission of Pakistan proposes a regulatory framework similar to Singapore and Hong Kong.
The Pakistan Securities and Exchange Commission estimates that about six REITs will be licensed within the first year, especially large asset management companies. Pakistan has seen an outflow of investments by foreign real estate development companies, mostly based in Malaysia and Dubai.
SECP has issued licenses to four parties: Arif Habib REIT Management Company, AKD REIT Management Company, Eden Developers REIT Management Company and SB Global REIT Management Company.
Philippines
REITs in the Philippines are available to the public after the 2009 Real Estate Investment Investment Act (RA 9856) was passed into law on December 17, 2009. Its Implementing Rules and Regulations have been approved by the Securities and Exchange Commission in May 2010. However, failed to attract investors due to its tight tax policies and high friction costs.
Singapore
Generally referred to as S-REIT, there are 31 REITs listed on the Singapore Stock Exchange, with the latest REIT, Cromwell European REIT, registered on November 30, 2017. The first formed is CapitaMall Trust in July 2002. They represent various property sectors including retail, industry, hotels and housing. S-REIT holds various properties in countries including Japan, China, Indonesia, and Hong Kong, in addition to local properties. In recent years, the list of foreign assets on the Singapore Stock Exchange has grown to take over the traditional list with local assets.
S-REITs is governed as a Collective Investment Scheme under the Singapore Code's Monetary Authority on Collective Investment Schemes, or alternatively as Business Trust.
Some rules that S-REIT must comply include:
- Maximum gearing ratio 35%
- The annual valuation of his property
- Restrictions for certain types of investments S-REIT can create
- Distribution of at least 90% of its taxable income
S-REITs benefit from a tax-advantaged status in which taxes are only paid at the investor level and not at the REITs level. In addition to REIT, there are ten Business Confidences ("BT") (similar to REITs but can hold unconventional assets and are not subject to strict rules compared to SREIT), and six Stapler Instruments (comprised of Trusted Business Unit and REIT units) , which is listed on the Singapore Exchange. The total market capitalization of the Trust on Singapore Exchange is around SGD 100 billion (at 30 Nov 17).
Thai
The Securities and Exchange Commission creates regulations to establish REIT as an investment vehicle by the end of 2012, opening the door for the first REIT to be listed in 2013.
United Arab Emirates
REIT legislation was introduced by the Dubai International Financial Center (DIFC) to promote the development of REIT in the UAE by passing the Investment Law no. 5 which entered into force on 6 August 2006. This restricts all of the 'real' REIT structures to domicile in the DIFC. The first REIT license to be issued will be supported by Dubai Islamic Bank with REIT named 'Emirates REIT' led by dot com entrepreneur Sylvain Vieujot.
The problem is the DIFC that has REIT can not acquire non-Freezone assets in the Dubai Emirate. The only Freezone zone approved by the federal government in the United Arab Emirates is the DIFC itself so therefore all properties outside this zone can be purchased by the Bay local passport holders (GCC) only. However, through collaboration with local authorities, Emirates REIT has been able to build a platform that allows it to buy property anywhere in Dubai, by giving a minimum of 51% local ownership of its shares. This allows the company to diversify its portfolio with a combination of efficient income from property in the prime location of Dubai. Emirates REIT is the first REIT established in the United Arab Emirates. This is also the first REIT registered at NASDAQ Dubai and one of the five REIs that fit the Shari'a in the world with a focus on earning assets.
Emirates REIT has a portfolio of more than USD 575.3 million consisting of a total of seven properties primarily focused on commercial and office space in December 2014. It has experienced substantial growth over the last four years. More information can be found at www.reit.ae
Saudi Arabia
Generally referred to as Real Estate Investment Funds, the regulation was launched in July 2006 by the Saudi Capital Markets Authority, the Regulation does not permit funds to be traded on the stock market and forces all funds to be drafted by Investment companies licensed by the CMA with the presence of real estate developers and some other key people.
Europe
Over the last few years the new REIT regime has been introduced in Europe to meet the demand from investors for efficient real estate tax investment vehicles; The REIT regime in Europe has also been enhanced. In Europe, the best performing REIT and the largest publicly traded real-estate company is Unibail-Rodamco SE.
Belgium
Bernheim Comofi (now AG Real Estate) introduced the Belgian REITs in 1995 with Befimmo's constitution. Other REITs in Belgium include Cofinimmo and Ascensio.
Bulgarian
REIT was introduced in Bulgaria in 2004 with Special Purpose Investment Companies Act. They are pass-through entities for corporate income tax purposes (that is, they are not subject to corporate income tax), but are subject to many restrictions.
Finnish
Reits Finlandia didirikan falls on Tahun 2010, a parka of Finlandia meloloskan "undang-undang pembebasan Pajak" (Law on the tax exemption for housing companies for renting villas, 299/2009). Bersama dengan "Undang-Undang Tentang Dana Real Estate" (Kiinteistörahastolaki, 1173/1997), ini memungkinkan adanya REIT forumahan yang efisien Pajak.
Qualifications
- REIT must be designated as a public company (julkinen osakeyhtiÃÆ'¶, Oyj) for this particular purpose. When the REIT is established, the minimum equity is 5MEUR and must be distributed to five separate investors.
- Minimum retention period: five years.
- At least 80% of its assets must be invested in real-estate housing.
- At least 80% of REIT's gross revenue should come from rental housing income.
- At least 90% of REIT taxable income, excluding unrealized capital gains, shall be distributed to shareholders through dividends.
- The corporation is tax exempt income, but the shareholder must pay the individual income tax on dividends.
- The largest individual shareholder may own less than 10% of the company's shares (30% maximum by end of 2013).
By 2018 Orava Residential REIT is the only REIT in Finland.
French
The French acronym for REIT is SIIC or "SCPI" (which are two different types of real estate trust). In France, Unibail-Rodamco is the largest SIIC. Gecina is France's second-largest public property company, with the third highest asset value among REIT Europe.
German
Germany plans to introduce REIT Germany (briefly, G-REIT) to create a new kind of real estate investment vehicle. The government is worried that failing to introduce REIT in Germany will result in a significant loss of investment capital to other countries. Nonetheless there is still political resistance to these plans, especially from the Social Democratic Party).
The Law on G-REITs entered into force on 1 June 2007, retroactively until January 1, 2007:
- REIT must be defined as a corporation - "REIT-AG" or "REIT-Aktiengesellschaft".
- At least 75% of its assets must be invested in real estate.
- At least 75% of G-REIT's gross revenues must be related to real estate.
- At least 90% of REIT taxable income should be shared with shareholders through dividends.
- The corporation is tax exempt income, but the shareholder must pay the individual income tax on dividends.
- Some restrictions apply for setting up REIT housing
Germany's public real-estate sector accounts for 0.21% of total REIT global market capitalization. Three of the four G-REITS are represented in the EPRA index, an index maintained by the European Public Real Estate Association (EPRA).
ireland
The 2013 Financial Law contains provisions for creating REIT structures in Ireland.
United Kingdom
The law establishing the rules for REITs in the United Kingdom is enacted in the 2006 Financial Law (now see Corporate Tax Law 2010 section 518-609) and came into effect in January 2007 when nine British property companies converted to REIT status, including five members of FTSE 100 on then: British Land, Hammerson, Land Securities, Liberty International and Slough Estates (now known as "SEGRO"). The other four companies are Brixton (now known as "SEGRO"), Great Portland Estates, Primary Health Properties and Workspace Group.
REIT UK should distribute 90% of their income to investors. They must be a closed investment trust and become UK citizens and publicly listed on the stock exchange recognized by the Financial Services Authority. The EPRA in Brussels annually publishes details of the UK REIT structure requirements.
To support the introduction of REIT in the UK, several commercial property and financial services firms established REIT and Quoted Property Group. Other important agencies involved include the London Stock Exchange, the British Property Federation and Reita. The Reita campaign was launched on 16 August 2006 by REIT and Quoted Property Group to provide a source of information on REIT, the property quoted and related investment funds. Reita aims to raise awareness and understanding of REITs and investment in the cited property company. This is done primarily through the www.reita.org portal, providing knowledge, education, and tools for financial advisors and investors.
Doug Naismith, managing director of European Private Investment for Fidelity International, said: "As emerging markets and structures like REIT are being introduced in more countries, we expect to see the overall market grow about ten per cent per year over the next five years. bringing the market to $ 1 trillion in 2010. "
The 2012 Financial Law brings five key changes to the REIT regime in the UK:
- removal of 2% entry fee to join the regime - this should make REIT more attractive as it reduces costs
- relaxation of listing requirements - REITs can now be cited AIM (the London Stock Exchange's international market for smaller growth companies) - make the list more attractive as it reduces costs and greater flexibility
- REIT now has a grace period of three years before it has to comply with near company rules (close companies are companies under the control of five or fewer investors)
- REIT will not be considered as a close company if it can be done close to the inclusion of institutional investors (the official trust unit, OEIC, pension schemes, insurance companies and sovereign immunities) - this makes REITs attract investment confidence
- the closing test of 1.25 times the financial cost is not too burdensome
Boyd Carson of Sapphire Capital Partners LLP commented that "the most important of these advantages is the ability of REITs to enroll in AIM and the elimination of a 2% entry fee into the regime is also a significant step forward."
Spanish
SOCIMI (listed company of Real Estate Capital)
Amerika Utara
Kanada
REIT Canada was established in 1993. They must be configured as trusts and not taxed if they distribute their net taxable income to shareholders. REITs have been excluded from the income tax legislation passed in the 2007 budget by the Conservative government. Many REIT Canada have limited liability. On December 16, 2010, the Ministry of Finance proposed amendments to the rules that define "QUALITY REITING" for Canadian tax purposes. As a result, the "Qualified REIT" is exempt from the level of the new entity, the "prescribed investment flow" (SIFT) tax trusted by all publicly traded trusts and partnerships as of 1 January 2011.
Mexico
Mexico has passed a law to allow equivalent to REITs, known as FIBRAs (Fideicomiso de Infraestructura y Bienes RaÃÆ'ces), for trading on the Mexican Stock Exchange. As with the laws of REITs in other countries, the company must qualify as FIBRA by complying with the following rules:
- at least 70% of the assets should be invested in financing or ownership of a real estate asset, with the remaining amount invested in government issued securities or mutual funds with debt instruments.
- Real estate assets acquired or developed must generate income and be held for at least four years.
- If the stock, known as the Certificados de Participación Inmobiliarios or CPI, is issued privately, there should be more than 10 unrelated investors at FIBRA.
- FIBRA must distribute 95% of annual profits to investors.
The first Mexican REIT was launched in 2011 and is called FIBRA UNO. According to the Wall Street Journal, REIT Mexico made its debut in March 2011 "after changes in government regulations allowed the structure, Fibras offers investors an easy way to own Mexican real estate and take attractive dividends at the same time. "Like US REITs, Fibras avoids paying corporate taxes as long as they distribute at least 95% of their earnings to shareholders as dividends."
United States
History
From 2008 to 2011, REIT faced good challenges from the slowing US economy and the financial crisis of the late 2000s, which depressed stock values ​​by 40 to 70 percent in some cases.
Legislation
Under the US Federal Income tax law, REIT is "any company, trust or association acting as an investment agent specializing in real estate and mortgage real estate" under the Internal Revenue Code section 856. Rules for federal income tax from REITs found especially in Part II (sections 856 to 859) of Section M of Chapter 1 of the Internal Revenue Code. Because REIT reserves the right to deduct dividends paid to its owners (usually referred to as shareholders), REIT may avoid incurring all or part of its liability for US federal income tax. To qualify as a REIT, organizations make "election" to do so by submitting Form 1120-REIT with the Internal Revenue Service, and by meeting certain other requirements. The purpose of this appointment is to reduce or eliminate corporate taxes, thereby avoiding double taxation of the owner's income. In return, REIT is required to distribute at least 90% of their taxable income to investors. REIT is a company that owns, and in many cases, operates real estate that generates revenue. REIT has many types of commercial real estate, ranging from office buildings and apartments to warehouses, hospitals, shopping centers, hotels, and even forests. Some REITs are also involved in financing real estate. The REIT structure is designed to provide a real estate investment structure similar to a mutual fund structure that provides investment in stocks.
Structure
In the United States, REIT is a company that owns, and in many cases operates, real estate that generates revenue. Some REIT finance real estate. To become a REIT, a company must distribute at least 90 percent of its taxable income to its shareholders annually in dividends.
To qualify as a REIT under US tax regulations, the company must:
- Structured as a company, trust, or association
- Administered by a board of directors or guardian
- Have transferable shares or transferable interest certificates
- Otherwise, taxable as a domestic company
- Not a financial institution or insurance company
- Together owned by 100 or more people
- Has 95 percent of its revenue comes from dividends, interest, and property income
- Pay dividends of at least 90% of REIT taxable income
- Have no more than 50% of the shares owned by five or less people during the last half of each tax year (rule 5/50)
- Have at least 75% of total assets invested in real estate
- Lower at least 75% of its gross income from rent or mortgage interest
- Has no more than 25% of its assets invested in tax-impaired REIT children.
Due to their access to debt and equity levels of companies that are inaccessible to real estate owners, REIT has a favorable capital structure. They can use this capital to finance the cost of repairs to tenants and lease commissions that their owners can not afford.
South America
Brazil
REIT was introduced in Brazil in 1993 by law 8668/93 and originally governed by instructions 205/94 and, presently, with instructions 472/08 of CVM (ComissÃÆ'Â o de Valores MobiliÃÆ'¡rios - which is the Brazilian equivalent of the SEC). Locally they are described as "FII" or "Fundos de Investimento ImobiliÃÆ'¡rio". FII dividends have been tax-free for private (non-corporate) investors since 2006, but only for funds that have at least 50 investors and are publicly traded on the stock market. FII, referred to as "REIT" to correspond to similar investment vehicles in the US, has been used both to own and operate independent property investments, related to a single property or part property, or to own several real property (multiple properties) funded through the market capital.
See also
- EPRA index
- Trust Australian real estate investments
- Closed funds
- Earnings revenue
- investment trust
- Mutual funds
- Real estate investments
- Trust royalty
- The stock market
- Real estate funds
- Company Taxable REIT
- real estate mortgage investment channel (REMIC)
References
External links
- US REVIEW List
- NAREIT - National Real Estate Investment Investment Association
- Real Estate Investment Trust in Curlie (based on DMOZ)
- EPRA - European Public Real Estate Association
Source of the article : Wikipedia
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